Some hope for failed property fund investors

THIRTEEN Illawarra investors who together lost almost $300,000 in a failed property fund are a step closer to recovering some of their money after a Wollongong City Council decision to rezone a plot of Windang land caught up in the saga.

Councillors this week voted 10-2 to rezone the former Neel's Squash and Tennis Centre site at 47-49 Boronia Avenue, overriding a recommendation from council staff to reject the proposal due to flood risk.

A report to Monday's council meeting said the 14,706-square-metre site was predominantly zoned for private recreation, which prohibited houses.

However, in 2005, the Land and Environment Court approved an 80-unit seniors housing development.

The property's owner, Colys Holdings Pty Ltd, borrowed $7.4 million from property investors TEYS Property Funds to start the project, but was only at the excavation stage when it went into administration in 2008, owing $8.4 million.

The site has been left idle ever since, accumulating rubbish, weeds and pools of stagnant water.

Colys Holdings' receiver, DWS Recovery, advised the council that 1093 people had invested $38 million in TEYS Property Funds, including 13 Illawarra residents who contributed approximately $287,000.

The fund is now in liquidation.

DWS Recovery said a rezoning of the Boronia Avenue site to allow single-level housing would make the land easier for it to sell and give investors a better chance of recovering some of their lost money.

Council staff acknowledged the situation but maintained, though broad economic considerations were relevant when assessing such a proposal, they considered that "the recovery of funds from a failed investment on a single parcel of land should not be a significant driver for determining appropriate land use".

They said the Lake Illawarra floodplain study flagged flooding problems in Windang and recommended an immediate review of zonings in the area.

"The site is identified as being within a high flood risk precinct and could be inundated for 24 hours," the staff report said.

"The study indicates that no further residential intensification should occur in Windang."

However, councillors believed allowing a small number of houses on the site - the rezoning would pave the way for 10 to 12 single-storey dwellings - was a compromise that would provide the best outcome for all involved.

"When you look at the site and read the whole report it's clear that there is still a risk there may be 80 dwelling on that site, which is clearly not the best outcome," Labor councillor Ann Martin said.

"This option will mean that if the planning proposal gets through there's a low- scale potential for the site that's much more in keeping with the surrounding area."